UPSC Previous Year Question | Prelims GS | 2021

Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?

  1. Diversion of resources to the purchase of real estate and investment in luxury housing
  2. Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.
  3. Large donations to political parties and growth of regionalism
  4. Loss of revenue to the State Exchequer due to tax evasion

Answer

Correct Answer

Loss of revenue to the State Exchequer due to tax evasion

Explanation

The principal concern for the government is the loss of tax revenue to the State Exchequer through tax evasion, which constrains spending on development and welfare. The other options are consequences of black money but not its main fiscal worry.

Topics: black money & tax evasion, economy, fiscal impact of black money, public finance